The U.S. economy is heating up. That's the latest news from the U.S. Bureau of Economic Statistics today which revised year-over-year first quarter GDP up to 2.1% from an original estimate of 1.9%.
Now consider these headlines, a then and now look at the "advance estimate" of GDP from April and today's third revision:
- MarketWatch (6/29/17): Poor start to 2017? Not really. First quarter GDP raised again to 1.4%
- MarketWatch (4/28/17): U.S. economy bogs down in first quarter with slowest growth in 3 years
Not to pick on MarketWatch, but headlines like this are pervasive across the mainstream media. Media outlets look at, what we see as, an arbitrary measure of GDP called the quarter-over-quarter seasonally adjusted annualized rate. It's a clunky measure you'd never see on the financial statements of any publically-traded company and subject to massive revisions. The QoQ SAAR for the first quarter of 2017 was originally estimated at 0.7% revised to today's 1.4%.
Don't get whipped around by these wonky measures. Instead, we look at year-over-year growth which more accurately captures the trend in the U.S. economy. Here goes: In the first quarter of 2015, year-over-year GDP peaked at 3.3% fell to 1.3% by the second quarter of 2016 and has since rebounded to 2.1% in the first quarter of 2017.
US growth Accelerating into early 2018
Evidence? Recent economic data on durable goods, capital goods, corporate profits and consumer confidence are all accelerating. Our predictive tracking algo has GDP accelerating to +2.69% and +2.99% year-over-year growth in 4Q17 and 1Q18.
And, in this environment, you want to be long Large Caps, Growth Stocks & Tech.